New Stimulus Plan Same as the Old: Spend, Spend, Spend

While the rest of the country talks about the urgent need to reduce the crushing debt burden and get the U.S. fiscal house in order, Senators such as Harry Reid (D–NV) and Charles Schumer (D–NY) propose spending even more.

Yet the President’s statement misses the bigger picture. It’s not just that stimulus projects weren’t as shovel-ready as the President had hoped—government spending does not stimulate economic growth or job creation, period.

The money the government redistributes must come from somewhere. Whether government stimulus represents current or future taxes, the story remains the same. By sucking money out of the private sector to hand to favored industries, the government reduces long-term productivity as scarce resources are transferred to less productive sectors and firms. As The Heritage Foundation explains:

Congress does not have a vault of money waiting to be distributed. Every dollar Congress injects into the economy must first be taxed or borrowed out of the economy. No new spending power is created. It is merely redistributed from one group of people to another. …In fact, large stimulus bills often reduce long-term productivity by transferring resources from the more productive private sector to the less productive government. The government rarely receives good value for the dollars it spends. However, stimulus bills provide politicians with the political justification to grant tax dollars to favored constituencies.

Ironically, news of the new “stimulus” plan came the same day that the Congressional Budget Office released its long-term budget report confirming the dire fiscal situation. But growing deficits and debt don’t seem to concern these Senators enough to actually get serious about spending cuts. According to Reuters:

A senior Democratic aide said the job-creation idea Senate Democrats are now pursuing represented a pivot in the deficit-reduction negotiations.

He said the idea presented to the White House has three components to help create jobs: new infrastructure spending, a payroll tax cut and support for clean energy jobs.

He did not say how large the infrastructure spending proposal would be.

They can do so by improving incentives to produce and to work: for example, by reducing regulations and tax distortions. They can do so by reducing the uncertainties surrounding future policy. They can do so by expanding foreign markets for domestic goods and services. Recent efforts to stimulate the economy have been unsuccessful because they did little or none of these things. Regulations have increased. Uncertainty has increased. Tax distortions have been left in place or even increased in some areas. And efforts toward free trade have been anemic, at best.

If Congress and the President want to get serious about creating jobs, they should take the approach of no-cost stimulus. Real growth policies don’t require more government spending. Rather, they reduce barriers to job creation for America’s businesses and entrepreneurs—the true engines of economic growth.

Romina Boccia focuses on federal spending and the national debt as the Grover M. Hermann fellow in federal budgetary affairs in the Roe Institute for Economic Policy Studies at The Heritage Foundation. Read her research.

Join The Discussion

The stimulus bill (ARRA) was a speck of dust when it comes to deficit and debts. It has next to no effect on long-term deficits. It was a temporary bill that was 1/3rd tax cuts, 1/3rd direct spending, and 1/3rd aid to states. If you were being intellectually honest and not politically biased, you would be able to make the case that ARRA was extremely helpful and took the country out fo the tailspin we were in. It seems as if you forgot where the country was just 2.5 years ago.

I am in total agreement that in the short term, spending is needed. When economies are weak, anyone with a decent economic background understands that cutting spending and raising taxes will cause economic weakness to be longer and deeper. That is why we should not cut anything in the next year – not until the economy is on stronger ground. To make massive cuts as the conservatives want to do now, will take us into another recession – which is appears the Republicans and conservatives want to do in order to live out Senator McConnell's stated goal of making Obama a one-term president. To me, it seems, Republicans care more about winnign elections than the future of the country.

It also seems only a conservative would call a plan that would cost trillions a 'no cost' spending plan. The 2001 and 2003 tax cuts are set to expire at the end of next year – that is the baseline. If you extend the tax cuts beyond next year – there is a big cost. The 2001 and 2003 tax cuts are the biggest factors that have created the long-term deficit/debt picture we are facing. Taxes have never been lower, we're in a terrible spot, and conservatives want to keep them where they are or even lower – that is economic nonsense.

Sadly this is all the democrats know in how to deal with the economy. It has worked in the past somewhat when our unemployment rate was 4-5%, but in this day of European Style Government Run Everything coupled with Anti-Business policies it's clear that the 9-10% (or 14-17% real rate) we will not see a normal US Economy until a change of administration occurs.

This is insanity and proof that DC is not listening. The GOP lineup has only a third of republicans enthused. So far each GOP candidate has publicly promoted Ryan's plan which is essentially the same ol' thing. Ryan's plan relies on Rosy Projections and massive deficit spending. It is not a cure, it is a continuation of the problem. In fact the most RINO of the bunch (Newt) has recently plummeted in the polls due to his liberal spending policies. Ironic for the man who led the Contract with America that brought spending under control in the 1990's – which led to the federal govrnment actually paying down the debt. To really test this we need one of these clowns to promote REAL budget cuts. This person needs to meaningfully cut entitlements, get rid of unconstitutional programs/agencies/departments, consolidate similar programs and functions, cut the DoD, and so on. I bets you that person would rise high on the polls. This stimulus spending is NOT WORKING! What did Einstein say? Insanity is doing the same thing over and over all the while expecting a different outcome. Lets stop the spending!

This is why this nation is going down. These goons say that it is not "us vs. them", but the third worse federal worker, behind Biden (#1) and Obama (#2) Geithner said the following in a House Small Business Committee hearing:

When Ellmers finally told Geithner that “the point is we need jobs,” he responded that the administration felt it had “no alternative” but to raise taxes on small businesses because otherwise “you have to shrink the overall size of government programs”—including federal education spending.

“We're not doing it because we want to do it, we're doing it because we see no alternative to a balanced approach to reduce our fiscal deficits,” said Geithner.

Spend, spend, spend? Let's get our terms correct. The stimulus kills, kills, kills America. When the American middle class goes down, so does the hope of the world. The American middle class is the last line of defense against the blood thirsty war machine that manipulates our good intentioned leaders and citizens. We need to control the banksters and military industrial complex. They are killing millions, and they are controling our government, media, education, etc.

the democrats are BEYOND their obligations and helped themselves in deceiving the public into fear of desperate need of more money! NO! WORK WITH LESS!!!

The debt ceiling does not have to be raised, members have to be disciplined! If the work of government was done with integrity there wouldn't be a peep for an increase. EVER!!!

Democrats know the more government the less freedom! How come "special interests" aren't being immediately removed and before anything else? "Special interests" are bias and discriminating and not essential!

Thank you H.F for your continued reporting on this issue.
All silencing for the truth, how we are being led in America continues to tear the very core out of our Democracy.
The fall out is so blurred that "lies" are retold as "truth."
No one in our Senate or Congress is brave enough to face our problems over debt and continued spending to solve the problem. It sickens me to look at the faces of Reid and Schumer.
We have 1.5 million homeless Americans.
Over 770,000 homeless American children enrolled in public education.
100,000 American service men and women homeless.
For the last month an ~ 400,000 plus jobs have been lost to working Americans.
We spend $12 billion every 30 days, in AF and Iraq while POTUS jokes , plays golf and continues to focus on amnesty.
The rest of us are wondering "why" impeachment proceeding haven't started.

It becomes increasingly obvious that "stimulus" and the outrageous spending (except on Defense and the wars) is meant by BHO and his advisers, known and unknown, to bring the U.S. into bankruptcy, making it necessary to spend more and more on "entitlement and horrendous interest payments. This will dry up spending on Defense, especially, eventually making China the sole superpower and SW Asia and the oil-rich Mideast countries (and their Islamist regimes) financial and military powers on the planet. The U.S. would become a third-rate backwater nation. Hope and Change. Transforming the country!! Dreams of my father!!

Kevin H. – At what point did the Government brainwash you into thinking that your money is only your money because the Governnment chooses not to take it from you ? Why on earth would you want to ever raise taxes on people ? The Bush Tax Cuts, now the Obama Tax Cut Extensions, help everybody. They are not targeted at the filthy rich that you must think have stolen their money somehow and not earned. I just feel sorry for the small world in which you must live. The Gov't is too darn big, regulates too much, and spends way beyond its means. Socialism does not work because you cannot change the basic human trait of laziness. Just because "your people" are in charge, doesn't mean Socialism will work. They are just looking for more useful idiots. I noticed you haven't been posting the nonsense about how great the stock market has been doing since Obama took office. What – is that 7 out of the past 8 weeks the DJIA has gone down . . .? How about the real inflation rate ? How about that GDP ? How about that unemployment ? Yeah Baby, This really must be Recovery Summer #2 ! Woo hoo !

If you think the republicans are going to vote against this you're all insane. just like they were going to defund health care right? Just like we were going to get lots of cuts on the debt ceiling. Boehner is a crying puppet. McConnel is a globalist on the same level as David Rockefeller. Republicans are worthless and they are just as complicit as the other tyrannical party. They just pretend they're for us. They're still elitists, globalists bought and sold by the megabanks and oil companies that are turning us into a world government. And we all know their new boy is Rick Perry who will carry out the same marching orders. And I'm sure Rush and Sean will brainwash you into thinking he's really some right winger conservative against the Fed. RIGHT!

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